D.D.
We put off having a second for a long time. In fact, I was just about to go back to work when we decided on #2. I've been home for seven years now. Financially, it is difficult. My husband works full time and he runs a business from home to pay the bills. It also helped that he was the Saving You Money producer for the news. He's always been finding cheaper ways to do things and with good reason because tv news pays nothing!
You can save money in little ways like buying store brand diapers (Walmart brand is as good as Pampers and costs MUCH less). We also recycled a lot of stuff we needed for the new baby. If you check out freecycle.org or craigslist.com, you'll find that there are people who are just giving away baby stuff they no longer need. Also, I did some shopping for the baby at consignment stores (and sold stuff to them, as well). And since this is #2 for you, just hold on to your older child's toys and clothes. A little end of the season shopping helps, too. If you shop for your children off the clearance racks at the end of the season, and put the stuff away for next year, you can save so much. I once found a winter coat for my son at Target for $3.89!
It isn't easy, and we certainly don't live like royalty. However, my sons are not missing anything important and we even manage some extras for them.